Amway: The Untold Story

Price Comparisons

Following are the results of three surveys comparing
the prices of a number of store products and the same or similar products
sold by Amway.

The first was done by myself. I conducted the
survey over a period of several months in the early part of 1994, and have
added several items from time to time since then. The second survey was
done in 1993 by Bradley Orner, who was an Amway distributor
for 3.5 years. The third was done in June of 1996 by Robert
Deering, an Amway distributor in Alaska. There are some differences
in how we each did our comparisons.

For reasons explained below, I chose not to include any of the Amway-produced
cleaning products. Neither did Robert for the same reason. Brad did include
a number of such items in his survey.

Neither Brad nor I factored in Performance Bonuses in our surveys. Robert,
on the other hand, calculates price differentials for distributors at 0
PV, 100 PV, and Direct Distributor PV (25%). It's also a simple matter
for anyone to factor in Performance Bonuses themselves.

It's significant that while all three surveys were done independently,
each without knowledge of the other and employing slightly different methodologies,
the results are very consistent. The average cost differential between
the Amway products purchased at "wholesale" (distributor pricing) and the
same or similar products purchased at local stores, was 140%, 149%, and
156%, respectively. In other words, if you buy these items from Amway you'll
end up paying about half again as much as you would at your local store.
(The Deering survey was done in Alaska, where distributors pay the "off
shore" prices, which are 15% higher than in the lower states. If you subtract
the additional "off shore" charge, the results fall right in line with
those of the other two surveys.)

[For more information also visit Charles Midgett's "The
Other Side of the Plan" and see his own price comparison and also his
"Buying From Your Own Store" article.]

Does Amway do it's own price comparisons?

Every December Amway publishes in the Amagram the results of their own
Personal Shoppers Catalog price comparison. From the 12/95 Amagram:

"The results of the 1995-96 price survey are complete, and
they show once again that Amway's Personal Shoppers Service Catalog offers
low, competitive prices—in addition to PV/BV.

To prove our point, we searched the 1995 editions of five popular
catalogs—Spiegel, J.C. Penny, Land's End, Finger Hut, and Williams-Sonoma—for
items that are the same as or similar to merchandise featured in the 1995-1996
edition of the Personal Shoppers Catalog. We surveyed a wide range of items,
including electronics, women's clothing, men's clothing, and various household
products.

Of the 143 items compared, our suggested retail price was less
than or equal to the competition 71% of the time. At distributor cost,
the results were even more favorable. We beat or equaled the competition's
price 92% of the time."

The wording used for the 1994-95 and 1993-94 survey's is almost identical,
with the exception that in 1993-94 the Lillian Vernon catalog was also
listed as one of the competition. The results of these two previous surveys
were:

1993-94...Amway less than or equal 55% of the time at suggested retail,
81% at distributor cost.

1994-95...Amway less than or equal 71% of the time at suggested retail,
81% at distributor cost.

As objective data, Amway's price comparison is so seriously flawed as to
be almost meaningless. There are several major problems:

Amway itself conducts the survey, which means that Amway gets to choose
a) who to define as "the competition," and b) which 143 products out of
thousands it gets to use for comparison purposes. Amway distributors often
claim that in order for a price comparison to be fair, the items in Amway's
catalog should only be compared with items in other mail order catalogs.
This is nonsense, of course; just because Amway offers only mail order
delivery, this doesn't restrict me as a consumer from choosing to buy the
same product from a local store if it's available. If Amway sells a particular
cordless phone, and my local Kmart sells the same phone, it's perfectly
fair and reasonable to compare Amway's price to Kmart's, even though for
obvious reasons Amway would rather you didn't.

Notice that in their comparison, Amway Corp. chooses to define "the
competition" as only higher-end mail order catalogs that are most likely
to have the highest prices. Since they compared electronics and household
products, among others, they could just as well have included retail outlets
that sell this type of merchandise. Kmart, Walmart, Target, Costco...there's
certainly no lack of choices. Amway is obviously stacking the deck in their
own favor by excluding these perfectly viable consumer options.

Amway refuses to publish the specifics of their price comparisons (yes,
I called and asked), so it's impossible for an objective observer to confirm
the results, or see if Amway chose to compare items that most people are
likely to buy, or if any of the Amway products were on sale or close-out.
For all we know, Amway could even just make these numbers up every year.

Amway distributors will no doubt point out, and rightly so, that
the price comparisons presented here may also not be as objective as they
could be. I readily admit that this is likely so, though I made an honest
effort to be objective. The obvious difference is that I'm not afraid to
publish my data for all to see; anyone who wishes to can judge my bias
for themselves and verify the accuracy of my data. Verify Amway's data?
Tough luck, Jack.

Amway chooses to present the results of it's survey in the least meaningful
way. Amway says that its prices were equal to or better than the competition
X percent of the time. "Equal" is self-explanatory, but what exactly does
"better" mean? A difference of $1 on a $500 item? It's anyone's guess.
In the price comparisons presented here, the results are given as the exact
percentage of price differential; in other words, this particular product
is X percent more or less expensive from Amway. Each comparison also gives
the average price differential for all products surveyed. Thus we can tell
that if were to buy products A, B, and C, we'd pay this much more or less,
something we certainly can't do with Amway's survey. (Of course, the comparisons
presented here also give the actual pricing information as well.) Amway
Corp. also publishes a simple product comparison chart (SA-6546) meant
to be handed out to show that the concentrated Amway products are cheaper
than the supposedly equivalent name-brand products. It states "Based
on manufacturer's recommended label/use instructions...It takes this much
of the store brand...to do what just one AMWAY product does." For example,
Amway claims it takes two boxes of Tide to equal one box of SA8.

As with Amway's other product comparison "data," this is also meaningless.
In this case the implied, but unproven, assumption we're being asked to
accept is that the products being compared are equal in effectiveness.
The reality is that we again have no way of knowing this, except in those
cases where the products being compared also happen to have been tested
and rated for effectiveness by Consumer Reports or some other independent
testing lab.

Without having to prove equal effectiveness, it's an easy matter to
manipulate price and usage amounts to give the false appearance of superior
value. Here's a simple example: A box of detergent Y has a suggested usage
amount of 1 cup per wash load and a cost of $.25 per cup. I buy the same
detergent from the manufacturer, sell it for the same price, but change
the suggested usage amount to 1/2 cup. Presto—my detergent is now twice
the "value" of the competing brand! Of course, it's also only half as effective
at the recommended usage amount, so you have to use twice as much to get
the same results. Amway's chart is cleverly worded to sound like Amway
is claiming equal effectiveness without actually making such a claim directly.

It's interesting that with all its much-touted billions, Amway
has never, to my knowledge, hired an independent testing facility to provide
objective proof of the alleged superiority of their products. They can
certainly afford it. Or, considering how poorly most of the Amway products
tested by Consumer Reports fared, maybe they can't.

Price Comparison 1

Sidney Schwartz

I used Amway's distributor prices as the basis of comparison, so the
distributor discount is already figured in. Since Amway charges shipping
on everything, that was added in. I chose mostly items that a typical family
would purchase on a regular basis, like breakfast cereal, aluminum foil,
underwear, disposable diapers, etc. I also included a few items that would
be purchased more occasionally, but that most families were still likely
to buy at some point, like a cordless phone and a vacuum cleaner.

In most cases the items compared are either exactly the same, or as
directly comparable as I could manage. I made no attempt to find the lowest
prices on anything on this list--I simply took the catalog with me when
I did my usual shopping, and looked for items that were the same or similar
to items in the catalog. I could just as easily have gone to a "warehouse"
store like Costco, where they also sell in bulk quantities, and the price
difference would have been even greater.

In some cases I compared one Amway product to several store products.
For example, I compared Amway's large disposable diapers to three other
brands of large disposable diapers. I felt this was fair for two reasons:

In many cases Amway only offers one choice of a product, as with the diapers,
while the store offers several different choices in a range of prices.
The fact that Amway offers a limited selection doesn't mean that I as a
consumer have to limit my choices.

In those instances where the store offered a choice of products, I could
easily have skewed the results against Amway by using only the cheapest
products for the purposes of the comparison. I felt that including the
more expensive store items as well as the cheaper ones would give a more
realistic result.

I purposely avoided comparing Amway-manufactured cleaning products
because of the famous "dilution" factor. I did this because in order for
a comparison between concentrated products to be valid, it must be demonstrated
that the concentration factors are equivalent; not having a testing lab,
I have no way of determining this. For the same reason, to infer or state
that Amway products are automatically superior because they are concentrated
is specious. The Consumer Reports ratings of Amway Dish Drops, Crystal
Bright and Zoom show that those Amway products are still poor values
regardless
of their concentration factor, which CR took into account. Also, not having
any experience with Amway products myself, I did not feel that I had a
basis for comparing Amway manufactured products to store products in terms
of effectiveness.

A few observations:

As I mentioned before, in many cases Amway offers only one choice of a
particular type of product. Their product selection may be very broad,
but it seems to also be very shallow in many areas. Amway sells child car
seats, but they only offered three models from one company. Likewise their
selection of vacuum cleaners, sewing machines, and many other products
is very limited compared to what you can find at any department or appliance
store. Also, major appliances are not covered by Amway's satisfaction guarantee,
so unless you know someone in your area who has one you can look at, you're
pretty much buying a pig in a poke. To me personally, having such limited
choices is not "convenient," not when there are dozens of stores within
a few minutes drive that offer many times the selection...and the chance
to examine the merchandise. And I've never had a problem returning merchandise
to someplace like Target or Sears, even if I just didn't like it.

Many of the Amway products have to be purchased in bulk. I find it especially
noteworthy that many of the Amway products purchased in bulk are more expensive
on a per-unit basis than store products purchased singly. For example,
Amway's pancake syrup, which must be purchased in cases of 12 bottles,
is more expensive per ounce than a single bottle of Log Cabin syrup purchased
in a store. Even though I chose not to do the price comparison at a "warehouse"
type store that also sells in bulk quantities, Amway's prices were still
higher.

Most of the Amway food products are generic or off-brands. In many cases
I could buy a single unit of a brand name product for less than I would
pay for Amway's generic product purchased in bulk.

Some Amway products were less expensive, in this case 12 of the 75 products
compared. Most were inexpensive items to begin with.

This comparison may not be perfect, but at least I tried.

The first, or top, item in each pair of items is the Amway catalog
product, the second, or bottom, is the store product. Reading across from
left to right, the headings are:

"Retail" = Amway suggested retail

"Dist. Cost" = Amway's distributor cost

"Ship" = shipping cost

"Final Cost" = Distributor Cost + Shipping

"#U" = number of units in item being compared

"Unit" = unit of measurement being used (ounces, square inches, etc.)

"Cost per U" = cost per unit

"Perc. Diff" = the Percentage Difference between the cost per unit of the
Amway product and the cost per unit of the store product. A Percentage
Difference of 100% would mean no difference in cost. A 50% Percentage difference
would mean that the Amway product is half the cost of the store product.
A Percentage Difference of 200% would mean that the Amway product is twice
as expensive as the store product.

Price Comparison 2

Bradley Orner

(Survey conducted in spring of 1993)

One issue that I have not had a strong opinion on to date is the price
of Amway products. They did seem expensive to me. Still, after years of
buying and using them, the arguments that their concentration and/or quality
made their usage costs comparable seemed compelling. Also, Amway prints
price comparisons from time to time. A few times I did find a really good
price on an item we purchased from Amway. Most product reviews by Consumer's
Reports have not been very favorable of Amway products, but only a few
have been reviewed.

Anyway, I just finished doing a price comparison for myself--something
I have wanted to do for quite some time. I soon learned that fair and true
price comparisons are difficult and time consuming to do. I have decided
to post the results, since others might find it of interest. First, some
background: In doing this, I was not out to demonstrate that Amway products
are either low or high priced--I just wanted to know the truth. I have
tried to be unbiased, but there is some degree of subjectivity in what
I have done, and any influence my bias might have would tend to be against
Amway products, I think.

I selected the list of products before looking up any prices. I did
not eliminate any products after looking at the results. Two or three products
were removed because I could not easily find a close equivalent. I picked
a wide range of common items.

I took care to make sure the competing product was truly equivalent.
Two-ply unprinted tissues were compared to two-ply unprinted tissues, powder
detergent to powder detergent, etc. I also took the price of the smallest
Amway size available and tried to find a similar sized package for the
competing product. In some cases the largest competing product package
was still much smaller than the Amway package; I did the comparison anyway.
I generally picked brand-name products, but some generic products are included.

A unit of comparison was selected and a unit cost obtained for all products.
I tried to make sure the unit of measure accurately measured the product
quantity--weight, volume, or area. Sponges for instance, were compared
based on cubic inches.

I did my shopping for the competing products at a local food & drug
store-- their prices seem to be a little below average but they are not
a discount "warehouse" store. Prices on a few items were from K- mart.

I took the store's regular price for the item, even if it was on sale.
Most of the Amway products I selected are available from the RDCs, which
means that their is a shipping cost of four percent of retail on orders
over $100 and $4 on orders under $100 (our direct distributor always charged
us shipping charges based on that--others distributors may have been charged
less, or more). Before computing the cost difference, 4% of retail was
added to the wholesale and retail prices for the Amway products. A few
items were only available from the catalog warehouse--shipping costs for
these items is 7% or higher. I figured the shipping costs as a percent
of retail, subtracted four percent, multiplied the result by the retail
price, then added this amount to the retail and wholesale price. Thus,
when the 4% is added to each product, the price of the Amway product reflects
the costs including shipping. I added 2% to the cost of the competing products
for transportation costs (though distributors often must drive to pick
up their products, retail customers usually don't and ours were delivered
to us). This 2% figure is pretty arbitrary, but is about equal to about
8 miles round trip at 27 cents per mile to purchase $100 of products. Often,
I only picked one brand of product to compare with. If I noticed a wide
range of prices between various brands (e.g., perfume or pharmaceuticals)
or was unsure of equivalency, I compared with a few different products.

I have included a usage adjustment. I wish I could have done better
here-- it is largely subjective and strongly impacts the results. The usage
factor listed indicates the unit quantity of the competing product required
to get the equivalent amount of use/benefit from one unit of the Amway
product. This takes into account concentration for cleaning products, nutritional
value for food supplements and weight control products, etc. I have listed
a code to give some indication of how I came up with these values:

L--dilution, usage instructions, or nutritional content on the product
label

T--Lab testing (by CU)

E--Personal experience (I was reluctant to use this one)

I--Intrinsic characteristics of the type of product suggested that the
usage factor was unity--differences in quality can nearly always be argued,
though

D--Default to unity in absence of any other reliable information

BTW, the usage factor is quite accurate for single vitamins but only an
approximation for multivitamins and weight control products--one might
have had much more vitamin C than the other, but much less Iron- -comparison
was difficult.

I compared both the wholesale and retail Amway price to the competing
product prices. The generic description of each product is followed by
two percentages. These percentages give the cost of the Amway product as
a percent of the cost of the competing product (i.e., a number over 100
means the Amway product costs more, 200 indicates it costs twice as much,
50 indicates it costs half as much). If the generic name is listed twice,
I did more than one comparison.

I dumped it into a text file from my spreadsheet, and it might be a
little difficult to read. Since it was about 160 columns wide, I split
it into left and right halves. Maybe you can download it, print it, and
tape the two halfs together. I was not sure what Genie and our telecommunication
programs would do with 160 character text lines.

Thanks for sending me your price comparison information. If you add
to it over time, I would be interested in seeing an update. I don't see
how people can repeatedly insist (and they believe themselves, too!) that
Amway prices are low after seeing price comparisons like yours. The usual
comeback, of course, is that some specific items might be higher but overall
the prices are lower, or that the quality makes up for the price. But between
the two of us we have compared probably over 200 items--definitely enough
for statistical significance--and as you mentioned aluminum foil is pretty
much aluminum foil. I guess in the end people will convince themselves
that what they want to be true is true. That, of course, is what Amway
is really about.

Price Comparison 3

Robert Deering

Price comparison was performed at Fred Meyers in Juneau on 12 June 96.
I selected products based from the Amway Products and Services Catalogue
and the Personal Shopper from the RDC. I avoided products with "concentration"
factors which are difficult to verify. I selected standard everyday products.
I did not know prices prior to selecting those products.

When comparing Fred Meyer products I tried to select two different products
unless I had an exact match. For the RDC generic brands I compared them
to the top name brand product and the local generic Fred Meyer brand product.
A couple items were dropped because a comparable Fred Meyer product was
not found.

From the 1 March Wholesale Price List I selected the product BV, Retail
and Wholesale. I selected from the case price/singular column when possible
to compare the smallest quantities. Often that was not possible. I included
4% shipping (except for some special ship rates). I then calculated the
bonus discount if the distributor is maintaining 100PV and again with 7500PV
(Direct Distributor).

I divided each cost by the unit, and compared unit price to unit price
on each item. I then calculated the percent difference between the Fred
Meyer product and the Amway product. A rating of 100% would mean the prices
are equal. A rating of 150% means that the Amway product is 50% higher
than the Fred Meyer product.